 "Credit cards with the lowest foreign transaction fee for your trip abroad")
Imagine you're backpacking through Thailand, finally reaching that picture-perfect beach. You decided you didn't want the hassle of carrying cash, so decided to carry your international credit card instead! But when you pay with your card, there's a surprise fee lurking on your bill. This sneaky culprit is called a markup fee, and it happens whenever you use your card overseas for transactions in a different currency.
Think of it like this: the shop charges you in Thai Baht (THB), but your Indian bank needs to convert that to Rupees (₹) for your statement. The markup fee is like an extra service charge your bank adds for doing this conversion. It's usually a percentage of the total purchase, typically between 1% and 3%.
So, how much can it add up to? Let's say you shop pants that cost ฿500 (Thai Baht). With a 2% markup fee, your bank might add an extra Rs 30 on top of the exchange rate. It might not seem like a lot on one pair of pants, but those Rs 30s can quickly add up on souvenirs, meals, and activities during your trip!
"Also known as a foreign transaction fee, a markup fee is charged by credit card issuers on transactions made in foreign currencies or with foreign merchant. This fee typically ranges from 1.5% to 3.5% of the transaction amount. A Goods and Services Tax (GST) of 18% is applied to the markup fees. For example, if your markup fee is 3% on a transaction of INR 10,000, the fee would be INR 300. GST on this fee would be INR 54 (18% of Rs 300), making the total cost Rs 354," said Adhil Shetty, CEO of Bankbazaar.
Foreign markup fees can add up quickly, especially for frequent travelers and online shoppers. By understanding how these fees work and taking steps to minimize them, you can save money and manage your finances more effectively. Always review the terms and conditions of your bank’s card offerings and consider alternatives like forex cards or no-foreign-transaction-fee credit cards to reduce your expenses while transacting internationally.
Rohit Chhibbar, Head of Credit Cards Business, Paisabazaar does the math:
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Most credit cards in India charge a 3.5% forex mark-up fee but this can vary from card to card. Travel cards or premium cards may charge a lower forex mark-up fee, with some cards even providing the zero forex mark-up benefit to the users.
Forex mark-up fee is charged as a percentage of the total transaction amount and 18% GST is applicable on the fee charged. When you make a transaction in a foreign currency, the amount is first converted to Indian Rupees (INR), and then 3.5% of this converted amount is charged as a forex markup fee. Besides this, a Goods and Services Tax (GST) of 18% will be applicable on the final fee amount.
For instance, if you spend USD 200, considering the exchange rate of 1 USD = Rs. 83, it sums up to Rs. 16,600. Then, a forex markup fee of 3.5% (Rs. 581) + 18% GST (Rs. 104.58) will be charged, and you have to pay a total of Rs. 17,285.58 for conducting this transaction.
Are there any credit cards in the market that charge low or zero foreign mark up?
Travel-centric or premium credit cards may charge a lower forex mark-up fee to help consumers who frequently travel abroad. These cards would also offer other travel benefits such as complimentary lounge access, accelerated rewards, co-branded travel benefits, etc. to help travellers save more.
Here is a list of credit cards that offer low to zero foreign mark up on foreign transactions
*18% GST will be applicable for conducting foreign currency transactions.
Source: Paisabazaar
What precautions should you take to avoid unnecessary fees when using your credit card abroad?
To avoid unnecessary fees when using your credit card abroad, consider using cards with low or no foreign transaction fees, withdrawing cash only when necessary to avoid ATM fees, and paying your credit card bill on time to avoid finance charges. Additionally, familiarise yourself with your card's terms and conditions to understand any potential fees or restrictions.
Here are some other options, as per BankBazaar:
- HDFC Bank Regalia ForexPlus Credit Card
- IDFC Bank First Wow Credit Card
- Federal Bank Scapia Co-branded Credit Card
- Axis Bank Burgundy Private Credit Card
- RBL World Safari Credit Card
- ixigo AU Credit Card
- Club Vistara IndusInd Bank Explorer Credit Card
- BookMyForex Forex Credit Card
HDFC Bank Regalia ForexPlus Credit Card
Card Issuance Fee: Rs. 1,000 plus applicable GST per card.
Reload Fee: Rs. 75 plus applicable GST per reload transaction.
Load in US Dollars, Use Anywhere: Opt for single currency forex card, available exclusively in US Dollars. Enjoy the convenience of zero cross-currency markup charges. Accepted at all VISA or MasterCard affiliated merchants or establishments worldwide, including online shopping platforms.
IDFC Bank First Wow Credit Card
Earn 1x = 1 Reward Point per Rs. 150 spent.
Earn 1 Reward Point = Rs. 0.25. The rewards program is not applicable to Fuel, EMI transactions, or cash withdrawals.
Effective 21 August 2023, Insurance premium payments have been included in the reward program and will earn 1x rewards, while Utility bill payments will now earn 1x reward points.
A cash advance fee of Rs. 199 is applicable per transaction.
Zero Fee: No Forex conversion fee.
Federal Bank Scapia Co-branded Credit Card
Experience zero forex markup on all international transactions.
Unlimited domestic lounge access with a minimum spend of Rs. 5,000.
Earn 10% Scapia coins on every eligible online and offline expenditure.
Receive 20% Scapia coins on travel bookings made through the Scapia App.
Enjoy instant redemption for flights and hotels on the Scapia app at 5 Scapia coins = Rs. 1.
Axis Bank Burgundy Private Credit Card
Benefit from no forex markup on international transactions.
Receive 30,000 welcome Edge Reward points upon your first transaction.
Enjoy no cash withdrawal charges or interest levied until the payment due date.
Gain flexibility to increase your credit limit during foreign travel.
RBL World Safari Credit Card
Avail a 0% markup fee on all foreign currency transactions.
Receive a MakeMyTrip voucher worth Rs. 3,000 upon card activation.
Enjoy Lounge Benefits with 10,000 bonus travel points, valued up to Rs. 2,500, on spends of Rs. 2.5 lakh in a membership year.
Earn an additional 15,000 travel points, worth up to Rs. 3,750, on spends of Rs. 5 lakh in a membership year.
Get a gift card worth Rs. 10,000 from brands like Amazon, Taj Experiences, and others on spends of Rs. 7.5 lakh in a membership year.
ixigo AU Credit Card
- Enjoy a 10% discount on Flight Bookings up to Rs. 1,000.
- Bid farewell to PG Charges on train bookings.
- Avail a 10% off on bus bookings up to Rs. 300.
- Receive a 10% instant off on hotel bookings up to Rs. 1,000.
- Valid using ixigo platforms only. Discounts on flight, hotel, & bus bookings can be availed once per month. PG charges are waived twice per month.
- Shop globally without worries, with zero mark-up fee on international purchases.
Club Vistara IndusInd Bank Explorer Credit Card
- Get a Lifetime waiver of Add-on card fee.
- Lifetime waiver of Late Payment charges.
- Lifetime waiver of Cash Advance fee.
- Lifetime waiver of Over limit fee.
BookMyForex Forex Credit Card
- Enjoy hassle-free travel worldwide with BookMyForex Multi-Currency Travel Forex Cards, free from forex markups or hidden charges. Prepaid Multi-currency Forex cards allow you to exchange currency at exact interbank rates, completely free of charge.
- BookMyForex Multi-Currency Forex Cards are accepted virtually everywhere across the globe, including at over 30+ million stores, 2+ million ATMs, and 1+ million e-commerce sites.
- Load up to 14 currencies on a single card and use it seamlessly in multiple countries.
Additional costs associated with using a Credit Card for Overseas Expenses
When employing your credit card for international transactions, you may encounter supplementary expenses beyond the foreign transaction fee. These expenses are not obligatory and are only applicable under specific circumstances.
- Taxation: Goods and Services Tax (GST) is imposed on all fees imposed by the bank.
- Cash Withdrawal Fee: If you withdraw cash from an ATM abroad, you will incur a cash withdrawal fee. This fee may either be a fixed amount or a percentage of the withdrawn sum.
- Finance Charges: Failure to pay your credit card dues on time or withdraw cash can result in the bank charging you interest. Typically, this interest rate falls within the range of 30% to 45% per annum.
- Currency Conversion Fee: Utilising an Indian credit card for a foreign currency transaction incurs a currency conversion fee imposed by banks. This fee, ranging between 3% to 5% of the transaction value, is applied on the settlement date rather than the transaction date.